NWPPA Bulletin August 2010
©Copyright 2010 by the Northwest Public Power Association. All rights reserved.
he Idaho Supreme Court appearsto have checked out for the sum-mer. Gone fishin’ it seems. Andfor bait it has opened up a colossal canof worms.On July 8, 2010, the court issuedits now infamous decision in
The Cityof Idaho Falls v. Jared Fuhriman
. Thecourt determined that the City of IdahoFalls’ 2011 power purchase agreement(2011 PPA) with the Bonneville PowerAdministration (BPA) violates ArticleVIII, §3 of the Idaho Constitution.This provision prohibits Idaho citiesfrom incurring any liability exceedingin that year the revenue provided forsuch year without first obtainingapproval from two-thirds of the city’svoting population. This prohibitiondoes not apply, however, to any “ordi-nary and necessary expense authorizedby the general laws of the state.”To make a long story short, theIdaho Supreme Court decided that amulti-year power purchase agreementis not an “ordinary and necessary”expense of a municipal utility. From apolicy standpoint, the decision is a dis-aster. But courts do not make policy,they interpret the law. Thus, the court’sdecision should be analyzed from alegal standpoint. Viewed in this con-text, the court’s interpretation of law in
is curious, at best:(1)The court expressly held that thewords “ordinary and necessary”require expenses to also be“urgent.” This is contrary to theplain reading of the words used inthe Idaho Constitution, and there-fore violates the cardinal rule of legal interpretation.(2)The court indicated that the legalprinciple of
(trans-lated loosely as “let the decisionstand”) compelled it to insert theword “urgent” into theConstitution because the Courthad recently done so in anothercase,
City of Boise v. Frazier
. Butthe Frazier case itself violates theprinciple of
by apply-ing a novel legal standard to theseConstitutional provisions.(3)The court also ignored its ownreasoning in
Asson v. City of Burley
, in which it explained thattrue power purchase contracts, asdistinguished from capital con-struction projects, would be“ordinary and necessary” munici-pal expense for purposes of Article VIII, §3.(4)The court also misapprehends thenature of the 2011 PPA. Thecity’s payment obligation underthe 2011 PPA remains contingentupon receipt of some power. Thecourt basically treats the 2011PPA as an energy
-purchaseagreement in which the whole of the city’s obligations for the termof the agreement are frontloadedinto the first year.(5) Even using the more stringentstandard of “urgency” adoptedby the court, the 2011 PPA stillshould have been found to bevalid. The unprecedented marketprice spikes, rolling blackouts,and utility bankruptcies causedby the California Energy Crisisshould have taught us all thatany forced reliance on short-term, market purchases makesutilities exceptionally vulnerableto price volatility. If this is not“urgent,” nothing is.The most direct consequence of the
decision is that the 2011PPA is invalid. It may also be arguedthat the current 2001 BPA power pur-chase agreements also are invalid to theextent that they were not approved bya popular vote. Taking it one step fur-ther, any other (non-BPA) currentpower purchase agreement that extendsbeyond the fiscal year in which it wasexecuted may also be invalid. Finally, if
really doheighten the standard to comply withArticle VIII, §3 by inserting the word“urgent,” then many other types of municipal contracts previously believedto be valid may no longer pass muster.This potentially includes any othercommodity supply agreements,employment contracts, and construc-tion contracts.What can be done? In this case, alegislation fix will not be sufficientbecause the court was not interpreting
by Richard Lorenz
What’s going on in Idaho?
We are not exactly sure what the Idaho SupremeCourt is fishing for. It may be an attempt to providea strict construction of the Idaho Constitution. Orit may reflect anti-government judicial activism.